NADA FOIAs to CFPB on Targeting Auto Dealers

The National Automobile Dealers Association (NADA) on Monday asked the Consumer Financial Protection Bureau (CFPB) to make public an agency memo that it claims refutes the Bureau’s long-standing assertions that it is not targeting auto dealers through enforcement actions and regulations.

According to a June 30, 2015, article in American Banker, three senior CFPB officials sent CFPB Director Richard Cordray a memo outlining how proposed settlement with American Honda Finance Corp. would further the agency’s “goal” of “significant[ly] limiting dealer discretion.”

A proposed CFPB regulation stipulating flat fees in auto lending will actually end up hurting consumers because franchised car dealers will not be able to cut rates, according to NADA. Forcing finance sources into adopting flat fees would eliminate a dealer’s ability to “meet or beat” a given rate, and could increase the cost of credit for millions of consumers, in NADA’s view.

The request for what is almost certainly a leaked CFPB document was made under the Freedom of Information Act and signed by NADA Chief Regulatory Counsel Paul Metrey.

It is common practice for banks and other lenders to set a base interest rate or the so-called “buy rate” and then for an auto dealership to “mark up” the interest rate to the final rate the customer pays on the loan for the car.

As always, it pays to shop since rates can vary drastically, and there have been cases of blatant discrimination where dealers charged varying amounts even though the victims have the same credit scores. (Read AutoInformed on Asian Auto Lending Discrimination in Los Angeles?)

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